Recently I've noticed that some supermarket companies are taking bold steps to use nonfood products and services to counter other retailers, like supercenters, big drug formats and dollar stores.
About a month ago, a report from the U.K. research house TNS Worldpanel caught my eye. The study showed that British supermarkets have nearly doubled the sales they do in certain nonfood categories, such as entertainment software and apparel, over the past five years (See SN's March 6 issue). Could U.S. supermarkets replicate that? That's unlikely because of the competitive differences between the two countries. Could they do more business in these or other nonfood categories? From the conversations I've had lately, that answer is a clear yes.
Two weeks ago I had the opportunity to write about how Giant Eagle boldly leverages nonfood categories to build traffic and sales (See SN's March 13 issue).
Within the confines of large, but still traditional-sized buildings, this regional chain has an offering of nonfood categories and services that includes video, magazines and books, prepaid gift cards, greeting cards and party goods, housewares, seasonal, pharmacy, dry cleaning, banks and digital imaging, and ties it together with one of most generous fuel rewards programs in the industry. That's in addition to the nonfood categories found in most stores, and tracked by companies like IRI and ACNielsen, such as batteries, lighting products, and health and beauty care.
By using its aggressive fuelperks! rewards program to build some of these categories, as well as overall store sales and traffic, one can make the argument that Giant Eagle has redefined convenience and the role of nonfood in the supermarket. Meanwhile, the retailer continues to experiment with optical departments and nurse-staffed health clinics.
In the Cleveland area, I find that Giant Eagle is doing a exemplary job of preemptive marketing, building a customer base against the day when supercenters arrive. These bold nonfood strategies are front and center.
Before sitting down to write the feature for this week's Nonfood Strategies section, I attended the co-located International Home and Housewares Show and the Association of Retail Marketing Services Retail Promotion Show in Chicago. I came back with a fistful of interviews about sourcing unique nonfood products that showed me just how vibrant this side of the business can be (see Page 29).
Unique nonfood products, whether sold in continuities, in-and-out promotions or some other kind of "treasure hunt" environment, are another way general merchandise products can add to the sales, margins and overall appeal of supermarkets, according to retailers and others I spoke to in Chicago. On display at the ARMS show was an array of clothing, purses and other bags, entertainment products, decorative clocks, framed artwork and brightly decorated cookware, among many other things.
As Mike Lumadue, director of HBC and GM, Weis Markets, Sunbury, Pa., told me, "If you're conservative and you do the me-toos and the this-worked-befores, you're never going to get ahead. You've got to take chances to differentiate yourself."
From all this, I've concluded that the savvy retailer's nonfood strategies should be focused on the future and innovating with new offers. The competition is too tough these days to do anything else.